IT Efficiency Versus Alignment

As technology is being accepted as the competitive strength of many companies, few are affording IT departments the recognition needed to support the business objectives. Many companies suffer from lack of alignment with IT and integration of the technology function as a key part of their operations.

To many corporate execs, 'alignment' seems to be a foreign term, so elusive that Forrester Research recently suggested that they might want to try instead for business technology synchronization.

A study by the Society for Information Management in 2006 supports the lack of IT/business alignment as the top challenge concerning CIO's.

In the effort to correct this oversight, many CIO's are attempting to put alignment before efficiency. A common tactic deployed of allocating set IT resources to each business unit is driving up up complexity, costs and inefficiencies.

In another survey by Bain & Company, 74 percent of respondents considered their IT operations both "ineffective and not in alignment with the business". The findings:

Increase in IT spend of 1.3 percent
3-year compound annual growth rate dropped by 3 percent.
For the 7 percent of firms who reported "achieving both effective operations and IT/business alignment", CAGR jumped 37 percent, while IT spending fell 10 percent.
The 8 percent of companies that considered themselves "effective yet not in alignment" managed to cut IT spending by 17 percent and increase growth by 10 percent.
The worst performers - the 11 percent of companies that considered their "IT operations in alignment with the business yet not effective". Spending grew 8.4 percent, while growth declined by nearly 10 percent.

For this reason, many operational consultants often suggest placing effectiveness before alignment. Others maintain that the two go hand in hand.

Very few companies have documented and analyzed their operational processes, and fewer still fully understand and communicate the relationships between business activities and IT resources.

One of the major obstacles faced is that business and IT rarely speak the same language. There are few links to vertical value chains, with IT often viewed as the necessary evil and bearer of all inefficiency blame. In reverse, IT often claim business expectations of IT systems are totally unrealistic, most managers lacking the understanding of how complex many implementations are and show little interest in attempting to understand. A lesson from Stephen Covey would not be amiss here.

Both efficiency and alignment of business and technology are critical factors for success. Whilst technology provides the basis for signficant gains in productivity, unless it is owned by the business, rather than IT, alignment will remain a distant dream.

that technology has enabled, there is still tremendous room for improvement in these areas.

Methodologies

Consulting firms each have their own methodology to achieve the goal of efficient alignment. Regardless of how this is package, most have common themes and steps:

Corporate

Value & Champion Enterprise Improvement
Include CIO's in all strategy development

IT Department

Develop quality Requirement Specifications - with the business
Make the right technology choices - with the business
Manage vendors productively
Streamline IT Governance

Business

Understand how their objectives support enterprise strategy
Improve operational anaytical ability
Improve business processes
Recognise the value technology plays in supporting both analytics and processes
Manage projects successfully using sound methodologies
Leverage knowledge of industry experts
Take ownership of unit capabilities - people, process AND technology

The key is fostering closer understanding between IT and the business. The IT department must fully undersand business priorities and have adequate staff to respond to thsoe needs. In most consulting programs I have been engaged in, the biggest challenge to success of the project was lack of IT resource.

It all starts at the top. In recent studies, 70% of the business strategy required implementation of technology, yet in only 30% of cases, were IT managers part of the strategy team.

Executives need to step up and accept that technology is the driving force behind future competiveness, and stop hiding from IT in the fear that they show their lack of understanding of technology.

Setting IT Strategy

IT strategy must be an integral component of the overall business strategy. A summary to the approach taken:

Understand the industry the company competes in
Identify what will differentiate players in that industry going forward
Identify the tactical actions required by each business unit to lead the industry, and process efficiencies required to maximize output for reduced input.
Identify IT solutions required to support those actions and efficiencies
Identify where a single IT solution can be shared by mulitple units
Prioritize technology implementation based on both strategic and technical capability
Place 'ownership of the technology' with the business unit - NOT IT
Provide budgets to meet these process improvement and technology requirements.

Alignment and efficiency do not need to be seen as distinct elements - they should be integrated into all business functions, such that tecnology is accepted by the business and a key performance enabler.

Process improvements should NEVER be done in isolation of technology - remember, all operations have three key components:

People - Process - Technology

Businesses have allowed a gap to develop between IT and the business. Closing this gaps starts at the top. IT is no longer just corporate networks, desktops and transactional systems. A new realm of business intelligence is already a major driving force in the success of business. Those businesses who fail to embrace such technology will not survive. CIO's must be included in strategy, and must be seen as a key part of the executive team.

IT executives cannot be effective at IT alignment when the business continually fails to include them in key strategic decisions. Integration of IT with the business also needs to be driven from bottom up, by communicating more with the business and seeking to partner with each business unit to help build a bridge of understanding.

Author: Gail La Grouw - Gail is a corporate performance consultant for Coded-Vision Consulting. She specializes in using business intelligence to drive performance in your business by linking strategy directly to measurable actions.

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